With the U.S. House of Representatives expected to sign off Friday on a $2 trillion stimulus bill in the face of the Covid-19 pandemic ravaging the United States, some payments executives are focusing on how to get a share of that cash into the hands of the country’s underbanked and unbanked population.
The bill, which passed the Senate earlier this week, has earmarked $301 billion in direct payments to U.S. households, with the exact amount each household gets varying depending on income. But how, and how soon, that money will be distributed isn’t entirely clear. If, as expected, most of it goes to households via checks, it could take weeks.
On top of that, checks could be expensive for a substantial share of the population. Some 63 million persons, or one in four adults, are said to be underbanked or unbanked, according to numbers from the Federal Deposit Insurance Corp., as cited by the Chicago-based Financial Health Network, which specializes in research on the unbanked population.
The size of that population has some bankers working on solutions. The Federal Reserve is expected to launch FedNow, a real-time facility, in three or four years, but it’s not clear how that will reach underbanked or unbanked persons, and in any case it’s a long way off. Meanwhile, some bankers are saying the need is now. “This is urgent stuff,” says Bob Steen, chairman and chief executive of Bridge Community Bank in Mechanicsville, Iowa, and an active participant in the Fed’s payments initiatives.
Steen says a better alternative could lie in technology developed by Open Payment Network Inc., a Pleasant Grove, Utah-based company. OPN’s network digitizes the U.S. dollar and delivers funds in real-time to digital wallets, where users can retrieve the money via cardless ATM withdrawals or spend it from the wallet using a tokenized cash card. “The unbanked and underbanked have mobile phones,” notes Steen. “We can get federal stimulus money into unbanked wallets.”
OPN, which was formerly known as WingCash, was one of a number of real-time payment models evaluated by the Fed in 2018, placing high in the ranking the Fed’s consultant, McKinsey & Co., performed at the time. Now, “the unbanked could use the platform like with physical currency,” says Bradley Wilkes, OPN’s founder. “Our goal is to improve the lives of U.S. citizens, particularly those who live on less. We’re trying to do it through financial institutions.”
Besides Bridge Community Bank, OPN is also working with North American Banking Co., a Roseville, Minn.-based financial institution. Michael Bilski, North American’s chief executive, is also chairman of the U.S. Faster Payments Council, a cross-industry group working on ways to facilitate real-time payments. OPN is looking to corporate credit unions and bankers’ banks to recruit more institutions, Wilkes says.
The company is collaborating with Bridge on two projects currently, Steen says, which involve payment cards issued on the Shazam network, a major electronic-funds transfer network based in Johnston, Iowa. Wilkes says OPN can scale up quickly. “We’re totally capable of distributing today,” he says.
Wilkes says he is also talking to the Digital Dollar Foundation, an initiative formed earlier this year to create a digitized central-bank currency for real-time payments, about a collaboration.
Wilkes has a long history of developing new payments capabilities. Before founding OPN, he had launched ProPay, a payments processor that Total System Services Inc. acquired in 2012. TSYS is now part of Global Payments Inc.
Now, Steen says Bridge and OPN are ready to meet the immediate need of getting stimulus cash into the hands of those without conventional financial services. “Not only have we solved this, but we can scale it in a matter of days,” he says.